Rush for HHG's $286m raising

Institutional investors appeared to have strongly supported HHG's surprise £118 million ($285.6 million) placement on Wednesday night, despite the restrictions on the ability of AMP's former British arm to release capital and pay near-term dividends. The London and Australian-listed HHG closed 1c higher at $1.23 on the local market as investors digested the capital raising alongside Wednesday's £848 million after-tax loss.

The 246 million shares placed at 48p ($1.16) represent 9.99 per cent of the company.

The placement was said to have closed early with strong demand, helping to boost market trading in the stock.

The one expected non-participant was AMP, which may sell its residual shareholding in its problem child later this year.

The proceeds of the offer are being used by HHG to buy out the remaining 24 per cent of its asset management division, Henderson Global Investors, that is held by its capital-constrained life fund, Pearl. The clean-up of HHG's complicated internal structure may make its life and funds management businesses easier to be taken over by predators, but AMP unsuccessfully sought a buyer for the whole business last year.

Wilson HTM said in a note: "We expect the share price to quickly move up to our valuation [of $1.40] . . . but we are not confident of the long-term growth prospects of the stock. We still cannot predict that dividends will be paid this decade."

Macquarie Equities was more optimistic that the boost to the life funds' capital adequacy due to the capital raising and restructure might bring forward dividend payments to 2005, rather than HHG's most optimistic scenario at the moment of 2006.

Credit Suisse First Boston said persistency, or the amount of client money retained during the period, continued to be a key concern, and the peak of withdrawals was expected in mid-2004. But it still raised its valuation to $1.50 a share.

Goldman Sachs JBWere said the buyout of Henderson was sensible, improving cash flow and making its capital position more robust to regulatory changes.